President Javier Milei fully engaged in the economic debate about the relationship between inflation and economic growth, and publicly destroyed those who argue that an increase in prices is supposedly a necessary condition for expanding activity.
In a message posted on his social networks, the president rejected that position and described it as wrong both theoretically and empirically.
The head of state expressed a firm position by pointing out that there is no positive relationship between inflation and growth, and warned of the risks of promoting such ideas in the design of public policies.
President Javier Milei.
“I am surprised, for the worse, by economists who say that if the government wants to grow it must accept higher inflation,” said the President, distancing himself from that approach. In his argument, he argued that even historical theories that proposed a relationship between inflation and activity have been overcome by the
evolution of economic thought.
Along these lines, he said: “I can understand that someone precarious can continue to believe in the Phillips Curve and there is a trade-off between inflation and unemployment (activity) even though economic theory has already buried it in 1968 and finished finishing between 1972 and 1973. (Fiedman/Phelps/Robert Lucas Jr.) ”.
In this way, the president dismissed the validity of that model, citing references such as Milton Friedman, Edmund Phelps and Robert Lucas Jr. , who questioned the inverse relationship between inflation and unemployment
.
Milei's approach went further and pointed directly against the idea that inflation can boost economic growth. “From there to jumping to a positive relationship between inflation and growth is both theoretical and empirical nonsense,” he
said. President Javier Milei.
In addition, the President also referred to other currents of economic thought, such as the one linked to the economist
James Tobin.
In that sense, he ironized: “I understand that some old fashioned person could come to believe in the James Tobin model (where the economy grows as it travels to barter), which, if Argentina made sense with the inflation it has had, should be a world power.” With this argument, he used the country's inflationary experience to reinforce his rejection of that hypothesis
.
The message also included a warning about the responsibility involved in the economic debate in the public sphere. “I think that many times you don't think seriously about what you say, much less do you become aware of what it means to make decisions that have an impact on millions of people. That's all... HELLO! ”, he concluded.
